Join Rudolph Rosenberg for an in-depth discussion in this video Creating a product-level projection, part of Financial Analysis: Making Business Projections.
Another great tool at your disposal…is to have a financial plan or even forecast…done at the product level.…One of the reasons is that you can use it…as a goal for you to reach on each of the product…or family of family of product you're selling.…Another great reason is that most of the time…products have a different gross margin profile…which means that some products…are more profitable than others.…Sometimes even companies sacrifice…most or all of their margin on a certain product…and use it as a way to attract new customers…with the objective of then…selling them more profitable products.…
Since products have a different gross margin profile,…that means that any change in performance…on a given products will influence…the profitability of your company.…If you generate as much revenue this year as last year…but do it by selling products that are less profitable,…you will end up making less money.…Let's talk briefly about how to prepare…a product level projection…since it is done on a revenue basis,…but we'll get most of the benefit…
Author
Rudolph Rosenberg
Released
9/9/2014- Distinguish between forecasting and planning.
- Recall the pros and cons of bottom-up projection.
- Explain how a finance manager can utilize a sales pipeline in business projections.
- Describe how a company can forecast its gross margin by product.
- Identify the pros and cons of using top-down projection.
- Recognize how business plans utilize forecasts.
- Summarize how to develop a set of worst-case scenarios.
Skill Level Intermediate
Duration
Views
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Introduction
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Welcome42s
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1. Financial Projection Basics
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Financial projections1m 34s
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2. Estimating Volumes, Price, and Revenue
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Revenue projection basics1m 46s
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Preparing past P&Ls3m 40s
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Market-driven forecasting2m 46s
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3. Estimating Cost of Production and Margin
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4. Estimating Operating Expenses
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Projecting fixed OPEX1m 55s
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Projecting variable OPEX1m 41s
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5. The Top-Down Approach
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The exit methodology2m 15s
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6. Setting Up Targets
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Moving from forecast to plan2m 10s
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Conclusion
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Next steps1m 10s
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Video: Creating a product-level projection